July 10, 2019

Will Prescription Drug Price Disclosures Have an Impact?

Colorado Passes New Law

The Colorado General Assembly recently passed new statute C.R.S. 12-42.5-308, which would require pharmaceutical manufacturer marketing employees or agents to present, at the time of marketing a drug to a Colorado prescriber, the wholesale acquisition cost (WAC) of any discussed products. The new law defines prescription drug marketing to include not only face-to-face detailing by a manufacturing sales representative, but also telephone conversations, mailings, video conferencing, emails or texts, or fax transmissions that provide educational or marketing information or material regarding a prescription drug. (The only noted exception to the written disclosure is during conversations at scientific meetings.) The new law requires the disclosure: 1) be in writing, and 2) disclose the names and WAC of three generic prescription drugs from the same therapeutic class (or up to three that are available).

According to bill sponsors, the purpose of the new law focuses on the premise that physicians are generally not well-versed in drug costs, whether brand-name drugs or generics. By requiring disclosure at the point of marketing, the stated objective is better-informed physicians who can “consider lower-cost alternatives,” which could in turn help to “contain prescription drug costs.”

The expected effective date for the new Colorado law is August 2, 2019, unless a petition is filed against the law pursuant to Section 1 (3) of Article V of the state’s Constitution. Should a petition be filed, the act, item, section or part petitioned against will not take effect unless approved in the November 2020 general election.

While the Newest, Colorado Is Not Alone on Marketer Price Disclosure

The Colorado requirement of prescription drug manufacturers to create written WAC price disclosures and train their representatives to carry and use them with every marketing interaction certainly adds a layer of complexity for pharmaceutical manufacturers and their employees. But it was actually Vermont that set the bar for this novel approach in 2003.

The Vermont Pharmaceutical Marketer Price Disclosure law, 18 V.S.A §4633, was enacted over a decade before the Colorado legislation. It was followed by an associated guide and FAQ, published by the Vermont Attorney General’s office in 2005. Similar to Colorado, the Vermont law in 18 V.S.A.4633(a) requires that:

  1. “When a pharmaceutical marketer engages in any form of prescription drug marketing directly to a physician or other person authorized to prescribe prescription drugs, the marketer shall disclose to the physician or other prescriber the average wholesale price (AWP) of the drugs being marketed. Disclosure shall include the AWP per pill and the price relationship between the drug being marketed and other drugs within the same therapeutic class.”

In line with the Colorado law, which extends beyond just face-to-face detailing meetings, Vermont also extends the covered promotional activity to include:

  • Mailings into Vermont to Vermont physicians or other persons authorized to prescribe drugs in Vermont, or to members of their staff.
  • Face-to-face meetings in Vermont with physicians or other persons authorized to prescribe drugs in Vermont, or to members of their staff, including promotional talks, and continuing medical education programs not supported by an unrestricted grant from the pharmaceutical marketer or manufacturer.
  • Telephone calls to Vermont to physicians or other persons authorized to prescribe drugs in Vermont, or to members of their staff.
  • Emails and other electronic communications sent directly to physicians or other persons who reside in Vermont or have their place of business in Vermont, and who are authorized to prescribe drugs in Vermont, or to members of their staff.
  • Hand delivery or shipment of promotional materials, including samples, to physicians or other persons authorized to prescribe drugs in Vermont, or to members of their staff.

In some ways, the Vermont law is broader than Colorado; note that prescriber staff are clearly in scope. Vermont also requires both the hand-carried disclosure and a dedicated and prescriber-accessible website for the comparative information. It also requires the AWP of presumably all drugs within the same therapeutic class and is not limited to only up to three generics. In contrast, however, Vermont limits its disclosure scope to only prescription oral medications, with the mandatory prices disclosure being per pill. Colorado has no current limitations on drug type or route of administration.

The Vermont Attorney General’s office provides specific form templates for the required disclosures, and the drug information must be updated quarterly with the AWP as listed on nationally recognized drug pricing platforms. Colorado is thus far silent on the format or timeliness of updates.

Will These State Laws Have an Impact?

Vermont and Colorado’s disclosure laws will undoubtedly impact organizational resources as pharmaceutical companies work to create the required disclosures and train marketing personnel about their use. It is also imperative that the listed information be accurate, given the potential of Lanham Act activity from competitors if something about the presentation is misleading. In addition, the new statute raises the question of whether the Colorado limitation to only three generics could itself generate allegations of bias in the rare circumstance there may be more than three generics on the market.

But will the marketer-carried price disclosure impact prescriber awareness or decision-making? And is there any planned enforcement for drug manufacturers who do not comply?

A search of the Vermont Attorney General’s website, which includes the Vermont Pharmaceutical Marketer Price Disclosure law, shows that information about the law was last updated in 2012. And while the website has a link to enforcements, those posted relate only to Vermont’s robust Prescribed Products Gift Ban and Disclosure Law, and not to enforcement of the marketer price disclosure law. A general Google search also generated no articles or summaries specifically addressing whether Vermont prescribers found the AWP disclosures information useful. In March 2018, however, the American Economic Association did publish an article entitled, “Informing Physicians: Would Doctors Prescribe Different Medications if They Knew How Much People Had to Pay for Them?” The article generally concluded that physicians are poorly informed about competitive drug prices but did seem to increase generic drug use once made aware of a brand drug going off patent and the availability of generic options. Whether this will translate into Colorado’s hoped-for containment of prescription drug costs remains to be seen as their law goes into effect.

Looking Ahead: Federally Directed Price Transparency in Advertisements

On May 10, 2019, the Centers for Medicare and Medicaid Services (CMS) published a new final rule, 42 CFR 403, requiring that direct-to-consumer television advertisements for prescription drugs and biologics — which are eligible for Medicare or Medicaid reimbursement — contain certain price transparency. Specifically, the ads were to disclose the WAC, or list price, for a typical 30-day supply of the drug, or for a typical course of treatment. A broad summary of the CMS rule is found below.

APPLIES TO Certain prescription drugs or biological products for which reimbursement is available through Medicare or Medicaid.
CITATION 42 CFR 403; 84 FR 20732.
FINAL RULE May 8, 2019 (published May 10, 2019).
EFFECTIVE DATE Originally planned for July 9, 2019.
PRICE DISCLOSURE Wholesale Acquisition Cost (WAC), or list price, for a typical 30-day regimen OR for a typical course of treatment. WAC to be current as determined on the first day of the quarter the ad will air.
EXCEPTION No disclosure needed if product has a WAC of less than $35/month for 30-day regimen or typical treatment course.
STATEMENT REQUIRED “The list price for a [30-day supply of] [typical course of treatment with] [name of prescription drug or biological product] is [insert list price]. If you have health insurance that covers drugs, your cost may be different.”
APPLICABILITY Television advertisements, but NOT other platforms like YouTube or Facebook.
PLACEMENT Legible text statement at end of advertisement; must be presented against a contrasting background for sufficient duration and in a size/font that allows easy reading.
COMPETITOR INFORMATION To extent permitted under current laws, may include an up-to-date list price of a competitor’s product so long as done in a truthful, non-misleading way.
ENFORCEMENT At least annually, CMS will post online a report of violations of the disclosure rule. It is anticipated by CMS and the Secretary of HHS that this could provide a basis for Lanham Act actions.

During the comment period for the new rule, CMS noted that manufacturers could still include other information in the TV ads pertaining to out-of-pocket costs (such as co-pay information or assistance cards) as long as the required language above is still covered, and the additional information does not obscure safety/effectiveness information.

In an interesting turn-about of events – and with a proposed rule effective date of July 9, 2019 – several large pharmaceutical companies challenged the implementation of this new rule, primarily alleging that CMS and the U.S. Department of Health and Human Services (HHS) exceeded their statutory authority, violated the First Amendment by compelling specific language, and that the TV ad disclosures would confuse consumers. The case was filed in the United States District Court for the District of Columbia on June 14, 2019 by Merck & Co., Eli Lilly and Company and Amgen Inc., in coordination with the Association of National Advertisers, Inc., and sought a declaratory judgment that the rule was invalid. Following expedited hearing on July 2, 2019, the court ruled for the plaintiffs on July 8, vacating the federal regulation and agreeing that the defendants had gone beyond the rulemaking authority granted to them by the Social Security Act. While drug manufacturers are undoubtedly breathing a collective sigh of relief for now, this case reinforces the increased focus of the current administration in finding new and novel methods to control drug pricing.

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